Im working with the bid and proposal guy for a California company thats probably in the seventy billion per year range. I sent him a Wall Street Journal article on how the new super majority in the house and senate would affect California companies. He said the company, as a result of the California elections, had convened its strategic planning board this week.

I would expect that theyll start moving projects to other states until they only have a minor footprint in California. The company owns plants around the world. But the bulk is presently in the LA region.

So you have decided its time to open your own restaurant and with hard work, an inventive menu and great service, you will succeed. Now the ideal place you have selected for this venture is San Francisco, California. There are a lot of owners that want to operate a first class, brand new, state of the art restaurant in San Francisco  a beautiful ambiance that fits the tenor of a great chef in a tony neighborhood that speaks to the San Franciscan palate.

Opening up a high-end eatery in the City of San Francisco is no easy feat and not for the faint of heart. In this day and economic atmosphere, it is extremely difficult to put together restaurant deals that make sense financially. It has driven people out of the business and left some of us veterans working harder than ever before to improve food, service and overall value to keep up with the burgeoning competition.

The usual restaurant deal is composed of an operating chef or managing partner along with some investors that find a site, negotiate a lease and then spend anywhere from $750 to $1,000 a square foot to build out the restaurant itself.

So, for the sake of simplicity, lets use the number of $900 a square foot to build out your kitchen and dining room. For 2,500 square feet the build out will cost you $2,250,000. (Remember these are just theoretical numbers, for a high-end place.) For your space, take improvement and upgrades you intend to make and divide by the total square footage. Plus, your rent on a space in the city  maybe as much as $6 per square foot  on 2,500 square feet could be as much as $15,500 per month.

A full liquor license in San Francisco will cost you as much as $250,000. You will need a contingency fund in case you run into some problems and delays in opening of about 7% of your total investment. What delays could there be?
Certificate of occupancy on your restaurant from the City of San Francisco Building Department.
Construction delays
Delay in approval of a liquor license
Construction delays
Health department sign off
Fire department sign off

Now unless you have a proven track record of opening restaurants and a great relationship with a bank, the only people that are going to give you $2,500,000 to build out a restaurant are private investors that are expecting a good return on their investment. Entrepreneurs will follow good ideas and it is imperative to have a great business plan to express your ideas and financial projections to your investors. There are investors looking for the lucrative return (not to mention the accolades) that owning a successful restaurant can bring, and they are willing to take the financial risk.

The tricky part with your investors is that not only do they want their original money back out of the deal, but they are going to want a return on their investment. The investors are going to be looking for a return of their original investment plus an annual return per year over the life of the restaurant. Usually the investors go with the prime lending rate plus 2 to 3 percent. Paying off investors and keeping them happy is a chore in itself. Now this is all before you open the doors.

What else might you need to open the doors? Well lets see:
A restaurant designer that is going to cost you about $45K
A public relations firm that is going to cost you $25K in the first year.
A lawyer to put together your partnership and operating agreements. Another $15K
Liquor and wine inventory of approximately $40K
Food inventory of approximately $15K
China glass and silverware $37K
Music system $10K
Two weeks of staff training before you open the doors $10K

Do note that all these dollar figures are very much top-line estimates, but my point remains: Between the lease and opening costs, it is almost prohibitive today to open a new restaurant properly given the financial constraints and operating challenges that we are faced with. Add to that the challenge of ramping up your restaurant from day one until you have stabilized monthly sales is a daily battle. A restaurant opening can last up to a year if you are doing your homework correctly. Every day is a refinement of the menu and ongoing education for your staff members.

You need experts to help you through the process of opening a restaurant if you havent done it before. The best advice I can give is to manage your investment with great care and focus on quality and execution. You will need a talented chef and a savvy general manager that are both fiscally knowledgeable to help you succeed.

8
posted on 11/11/2012 6:26:37 AM PST
by CreviceTool
( Obama is standing above the country above - above the world, he is sort of a God = Evan Thomas)

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